Historical Yield Volatility – Uniswap V2 Pools

Introduction

Part of the appeal to DeFi is the ability to earn passive income by providing liquidity to different pools and earning a small portion of the fees collected from traders using said pools. The issue is that these yields vary based on demand for the assets in the pools. Some pools lure people in with absurd APYs, but ultimately do not sustain these returns.

We are interested in studying the volatility of these returns over time to see if there are any trends. This could shed more light into the pools you could potentially provide liquidity to.

Scope

For this hackathon, we’ve limited our scope to just studying the Uniswap V2 pools. Calculating volatility on these pools’ returns is relatively straightforward and there’s enough usage to provide an interesting analysis.

Volatility over 10/50/100 Days

These time periods were chosen arbitrarily. They’re aimed at providing a short/medium/long term volatility measure. This measure is calculated by computing the daily APY for each token pair and then taking a rolling standard deviation based on the window we’re interested in. We expect to see the short term volatility measure be more sporadic than the longer-term measures.

Plots – Stable Pools

Plots – DeFi Bluechips